TAXES AND INCENTIVES TO BUSINESSES

    Corporate income tax

       Under the Corporate Income Tax Act (CITA), all legal entities and unregistered partnerships involved in business activities in the country are subject to a corporate income tax of 10%. For the purposes of this Act, the unregistered partnerships are treated equally with the legal entities.
        For local legal entities, the tax is levied on all income and revenues, regardless of where these have been generated.
         For foreign legal entities, the tax is levied only on their business activities in Bulgaria.


    Value-added tax (VAT)

        This tax is regulated by the Value-Added Tax Act (VATA). In Bulgaria, this tax is based on the principle of neutrality, i.e. the 20% tax rate is applied to all commodities and services sold in the country, except for the tax exempt.

         As of January 1, 2007. the following three VAT regimes are applicable in Bulgaria:

• deliveries made within the country;
• deliveries between Bulgaria and the EU member states;
• deliveries between Bulgaria and non-EU states, the so-called third countries.

        The new, special VAT regime concerns the deliveries between Bulgaria and the EU countries, i.e. the so-called intra-Community trade. The law introduces several new ways of taxing such deliveries, depending on whether the supplier and the recipient are registered for VAT purposes or not. These ways include:

    1.                   Taxation of intra-Community delivery of goods

    2.                   Taxation of intra-Community acquisition of goods

    3.                   Taxation of intra-Community services

    4.                   Taxation of new motor vehicles and excise goods

    5.                   Taxation of distance deliveries

    6.                   Taxation of three-party deliveries

    Business Incentives

• Predictable business environment
• Stable and positively growing credit rating in both local and foreign currency (Fitch, Standard&Poor’s, Moody’s, Japan Credit Rating Agency)
• Opportunity for VAT exemption for the imports of equipment for investment projects valued more than EUR 5 million
• Annual depreciation rates of 30% for machinery and equipment, 50% for new equipment for the purposes of a new investment or expansion, and 50% for software and hardware
• Double taxation agreements with 61 countries 
• Foreign investment protection and encouragement agreements with 60 countries
• Land acquisition through a company registered in Bulgaria, with up to 100% foreign ownership
• Opportunities to apply to the EU Structural and Cohesion Funds.